Thursday, October 13, 2011

Settling In to Earnings Season

Third-quarter earnings season is underway, and if the analysts are to be believed, this one could be a doozy. The analysts' consensus calls for profits to grow 13 percent for this quarter over the third quarter of 2011. The forecast also calls for fourth-quarter profits for S&P 500 companies to edge up even further, to 15 percent.

As of the beginning of this week, 29 companies in the S&P 500 had announced their earnings, and 21 had beaten the analysts' estimates. That's a mark of 72 percent, but remember, the average percentage of companies that beat analysts' earnings estimates is 61 percent. So we're above average, but not by as much as that 72 percent might suggest.

On the other hand, the Web site Thestreet.com looked at all the companies that had pre-announced earnings guidance in recent weeks, and found that the ratio of negative-to-positive news was 2.6 to 1. That might sound terrible, but again, those numbers are ordinarily skewed. The average figure is 2.3 to 1, so the number of companies reporting bad news is only a little bit higher than normal.

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